I 

116TH CONGRESS 

1ST SESSION H. R. 3063 

To regulate certain State taxation of interstate commerce, and for other 

purposes. 

IN THE HOUSE OF REPRESENTATIVES 

JUNE 3, 2019 

Mr. CHABOT (for himself and Mr. SCOTT of Virginia) introduced the following 

bill; which was referred to the Committee on the Judiciary 

A BILL 

To regulate certain State taxation of interstate commerce, 

and for other purposes. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Business Activity Tax 

5 Simplification Act of 2019’’. 

6 SEC. 2. MODERNIZATION OF PUBLIC LAW 86–272. 

7 (a) SOLICITATIONS WITH RESPECT TO SALES AND

8 TRANSACTIONS OF OTHER THAN TANGIBLE PERSONAL

9 PROPERTY.—Section 101 of the Act entitled ‘‘An Act re10 lating to the power of the States to impose net income 


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1 taxes on income derived from interstate commerce, and 

2 authorizing studies by congressional committees of mat3 ters pertaining thereto’’, approved September 14, 1959 

4 (15 U.S.C. 381 et seq.), is amended— 

5 (1) in subsection (a), by striking ‘‘either, or 

6 both,’’ and inserting ‘‘any one or more’’; 

7 (2) in subsection (a)(1), by striking ‘‘by such 

8 person’’ and all that follows and inserting ‘‘(which 

9 are sent outside the State for approval or rejection) 

10 or customers by such person, or the representative 

11 of such person, in such State for sales or trans12 actions, which are— 

13 ‘‘(A) in the case of tangible personal prop14 erty, filled by shipment or delivery from a point 

15 outside the State; and 

16 ‘‘(B) in the case of all other forms of prop17 erty, services, and other transactions, fulfilled 

18 or distributed from a point outside the State;’’; 

19 (3) in subsection (a)(2), by striking the period 

20 at the end and inserting a semicolon; 

21 (4) in subsection (a), by adding at the end the 

22 following: 

23 ‘‘(3) the furnishing of information to customers 

24 or affiliates in such State, or the coverage of events 

25 or other gathering of information in such State by 


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1 such person, or his representative, which information 

2 is used or disseminated from a point outside the 

3 State; 

4 ‘‘(4) those business activities directly related to 

5 such person’s potential or actual purchase of goods 

6 or services within the State if the final decision to 

7 purchase is made outside the State; and 

8 ‘‘(5) by reason of sales or transactions of a dig9 ital good or a digital service.’’; 

10 (5) by striking subsection (c) and inserting the 

11 following: 

12 ‘‘(c) For purposes of subsection (a), a person shall 

13 not be considered to have engaged in business activities 

14 within a State during any taxable year merely— 

15 ‘‘(1) by reason of sales or transactions in such 

16 State, the solicitation of orders for sales or trans17 actions in such State, the furnishing of information 

18 to customers or affiliates in such State, or the cov19 erage of events or other gathering of information in 

20 such State, on behalf of such person by one or more 

21 independent contractors; 

22 ‘‘(2) by reason of the maintenance of an office 

23 in such State by one or more independent contrac24 tors whose activities on behalf of such person in 

25 such State are limited to making sales or fulfilling 


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1 transactions, soliciting orders for sales or trans2 actions, the furnishing of information to customers 

3 or affiliates, or the coverage of events or other gath4 ering of information; or 

5 ‘‘(3) by reason of the furnishing of information 

6 to an independent contractor by such person ancil7 lary to the solicitation of orders or transactions by 

8 the independent contractor on behalf of such per9 son.’’; and 

10 (6) in subsection (d)(1)— 

11 (A) by inserting ‘‘or fulfilling transactions’’ 

12 after ‘‘selling’’; and 

13 (B) by striking ‘‘the sale of, tangible per14 sonal property’’ and inserting ‘‘a sale or trans15 action, furnishing information, or covering 

16 events, or otherwise gathering information’’. 

17 (b) APPLICATION OF PROHIBITIONS TO OTHER BUSI18 NESS ACTIVITY TAXES.—Title I of the Act entitled ‘‘An 

19 Act relating to the power of the States to impose net in20 come taxes on income derived from interstate commerce, 

21 and authorizing studies by congressional committees of 

22 matters pertaining thereto’’, approved September 14, 

23 1959 (15 U.S.C. 381 et seq.), is amended by adding at 

24 the end the following: 


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1 ‘‘SEC. 105. For taxable periods beginning on or after 

2 January 1, 2019, the prohibitions of section 101 that 

3 apply with respect to net income taxes shall also apply 

4 with respect to each other business activity tax, as defined 

5 in section 5(a)(2) of the Business Activity Tax Simplifica6 tion Act of 2019. A State or political subdivision thereof 

7 may not assess or collect any tax which by reason of this 

8 section the State or political subdivision may not impose. 

9 ‘‘SEC. 106. For purposes of this title— 

10 ‘‘(1) the term ‘digital good’ means any software 

11 or other good that is delivered or transferred elec12 tronically, including sounds, images, data, facts, or 

13 combinations thereof, maintained in digital format, 

14 where such software or other good is the true object 

15 of the transaction, rather than the activity or service 

16 performed to create such software or other good, 

17 that results in the delivery to the customer of a com18 plete copy of such software or other good, with the 

19 right to use permanently or for a specified period, 

20 and includes as an incidental component charges for 

21 the delivery or transfer of such software or other 

22 good; and 

23 ‘‘(2) the term ‘digital service’ means any service 

24 that is provided electronically, including but not lim25 ited to audio services, data processing, cloud comVerDate Sep 11 2014 00:31 Jun 12, 2019 Jkt 089200 PO 00000 Frm 00005 Fmt 6652 Sfmt 6201 E:\BILLS\H3063.IH H3063

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1 puting, the provision of remote access to or use of 

2 a digital good, and includes as an incidental compo3 nent charges for the electronic provision of the dig4 ital service to the customer.’’. 

5 SEC. 3. MINIMUM JURISDICTIONAL STANDARD FOR STATE 

6 AND LOCAL NET INCOME TAXES AND OTHER 

7 BUSINESS ACTIVITY TAXES. 

8 (a) IN GENERAL.—No taxing authority of a State 

9 shall have power to impose, assess, or collect a net income 

10 tax or other business activity tax on any person relating 

11 to such person’s activities in interstate commerce unless 

12 such person has a physical presence in the State during 

13 the taxable period with respect to which the tax is im14 posed. 

15 (b) REQUIREMENTS FOR PHYSICAL PRESENCE.— 

16 (1) IN GENERAL.—For purposes of subsection 

17 (a), a person has a physical presence in a State only 

18 if such person’s business activities in the State in19 clude any of the following during such person’s tax20 able year: 

21 (A) Being an individual physically in the 

22 State, or assigning one or more employees to be 

23 in the State. 

24 (B) Using the services of an agent (exclud25 ing an employee) to establish or maintain the 


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1 market in the State if such agent does not per2 form business services in the State for any 

3 other person during such taxable year. 

4 (C) The leasing or owning of tangible per5 sonal property or of real property in the State. 

6 (2) DE MINIMIS PHYSICAL PRESENCE.—For 

7 purposes of this section, the term ‘‘physical pres8 ence’’ shall not include— 

9 (A) presence in a State for less than 15 

10 days in a taxable year (or a greater number of 

11 days if provided by State law); or 

12 (B) presence in a State to conduct limited 

13 or transient business activity. 

14 (c) TAXABLE PERIODS NOT CONSISTING OF A

15 YEAR.—If the taxable period for which the tax is imposed 

16 is not a year, then any requirements expressed in days 

17 for establishing physical presence under this Act shall be 

18 adjusted pro rata accordingly. 

19 (d) MINIMUM JURISDICTIONAL STANDARD.—This 

20 section provides for minimum jurisdictional standards and 

21 shall not be construed to modify, affect, or supersede the 

22 authority of a State or any other provision of Federal law 

23 allowing persons to conduct greater activities without the 

24 imposition of tax jurisdiction. 

25 (e) EXCEPTIONS.— 


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1 (1) DOMESTIC BUSINESS ENTITIES AND INDI2 VIDUALS DOMICILED IN, OR RESIDENTS OF, THE

3 STATE.—Subsection (a) does not apply with respect 

4 to— 

5 (A) a person (other than an individual) 

6 that is incorporated or formed under the laws 

7 of the State (or domiciled in the State) in which 

8 the tax is imposed; or 

9 (B) an individual who is domiciled in, or a 

10 resident of, the State in which the tax is im11 posed. 

12 (2) TAXATION OF PARTNERS AND SIMILAR PER13 SONS.—This section shall not be construed to modify 

14 or affect any State business activity tax liability of 

15 an owner or beneficiary of an entity that is a part16 nership, an S corporation (as defined in section 

17 1361 of the Internal Revenue Code of 1986), a lim18 ited liability company (classified as a partnership for 

19 Federal income tax purposes), a trust, an estate, or 

20 any other similar entity if the entity has a physical 

21 presence in the State in which the tax is imposed. 

22 (3) PRESERVATION OF AUTHORITY.—This sec23 tion shall not be construed— 

24 (A) to modify, affect, or supersede the au25 thority of a State to enact a law and bring an 


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1 enforcement action under such law or existing 

2 law against a person or entity, including related 

3 person or entity, that is engaged in an illegal 

4 activity, a sham transaction, or an actual abuse 

5 in its business activities in order to ensure a 

6 proper reflection of its tax liabilities; or 

7 (B) to supersede the authority of a State 

8 to require combined reporting. 

9 SEC. 4. GROUP RETURNS. 

10 If, in computing the net income tax or other business 

11 activity tax liability of a person for a taxable year, the 

12 net income or other economic results of affiliated persons 

13 is taken into account, the portion of such combined or con14 solidated net income or other economic results that may 

15 be subject to tax by the State shall be computed using 

16 the methodology that is generally applicable to businesses 

17 conducting similar business activities and, if that generally 

18 applicable methodology employs an apportionment for19 mula, the denominator or denominators of that formula 

20 shall include the aggregate factors of all persons whose 

21 net income or other economic results are included in such 

22 combined or consolidated net income or other economic re23 sults and the numerator or numerators shall include the 

24 factors attributable to the State of only those persons that 

25 are themselves subject to taxation by the State pursuant 


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1 to the provisions of this Act and subject to all other legal 

2 constraints on State taxation of interstate or foreign com3 merce. 

4 SEC. 5. DEFINITIONS AND EFFECTIVE DATE. 

5 (a) DEFINITIONS.—For purposes of this Act: 

6 (1) NET INCOME TAX.—The term ‘‘net income 

7 tax’’ has the meaning given that term for the pur8 poses of the Act entitled ‘‘An Act relating to the 

9 power of the States to impose net income taxes on 

10 income derived from interstate commerce, and au11 thorizing studies by congressional committees of 

12 matters pertaining thereto’’, approved September 

13 14, 1959 (15 U.S.C. 381 et seq.). 

14 (2) OTHER BUSINESS ACTIVITY TAX.— 

15 (A) IN GENERAL.—The term ‘‘other busi16 ness activity tax’’ means any tax in the nature 

17 of a net income tax or tax measured by the 

18 amount of, or economic results of, business or 

19 related activity conducted in the State. 

20 (B) EXCLUSION.—The term ‘‘other busi21 ness activity tax’’ does not include a sales tax, 

22 a use tax, or a similar transaction tax, imposed 

23 on the sale or acquisition of goods or services, 

24 whether or not denominated a tax imposed on 

25 the privilege of doing business. 


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1 (3) PERSON.—The term ‘‘person’’ has the 

2 meaning given such term by section 1 of title 1 of 

3 the United States Code. Each corporation that is a 

4 member of a group of affiliated corporations, wheth5 er unitary or not, is itself a separate ‘‘person’’. 

6 (4) STATE.—The term ‘‘State’’ means any of 

7 the several States, the District of Columbia, or any 

8 territory or possession of the United States, or any 

9 political subdivision of any of the foregoing. 

10 (5) TANGIBLE PERSONAL PROPERTY.—For pur11 poses of section 3(b)(1)(C), the leasing or owning of 

12 tangible personal property does not include the leas13 ing or licensing of computer software. 

14 (b) EFFECTIVE DATE.—This Act shall apply with re15 spect to taxable periods beginning on or after January 1, 

16 2020. 

Æ 


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